This blog addresses the use of music in video games. It is a re-print a portion of my forthcoming book on the Future of the Music Business now available on amazon.com

The Increasing Importance of Music to Video Games and the Increasing Importance of Video Games to the Music Business

The sale of video games is a huge business. The income from sales of a successful game can rival the financial success of a major motion picture. An article in the New York Times dated November 14, 2004 titled “Hollywood Would Kill for Those Numbers” by Michael Marriott, reported that Microsoft estimated that first day sales of Halo 2, its best-selling video game that plays on Microsoft’s Xbox console, were $125 million dollars. According to Mr. Marriott, Microsoft “executives gleefully note[d],” that this amount “topped the opening weekend of the animated-film-of-the-moment, ‘The Incredibles,’ by some $55 million.” Last year, the sales of video games exceeded $20 billion worldwide.

Paralleling the growing popularity of video games has been another pattern: many of the hottest video games are using more music, both previously released tracks (including those by superstars as well as underground hits), and music specifically composed, produced and recorded for particular games. In the midst of dwindling opportunities to break new music on commercial radio or MTV, and the slump in CD sales, both indie artists and major record companies see opportunities. Video games are becoming both an important resource in breaking new talent, and an important new source of revenue for big labels and established artists.

The first page of the Business Section of the New York Times on November 15, 2004, carried an article titled “Hey, Cool Music. And There’s a Video Game Too?” by Noah Robischon. The first paragraph reported:

"When the rapper Snoop Dog’s version of the 1971 song ‘Riders on the Storm’ makes its debut tomorrow, it will not premiere on MTV or on the radio. Instead, the song, which was recorded with the surviving members of the Doors, and includes outtakes of Jim Morrison’s vocals, will be heard on Need For Speed Underground 2, a video game from Electronics Arts."

The article's main point was that video games have become an important avenue for the marketing and distribution of music. Robischon explains that the Doors were looking for a “way of reinventing their catalogue for a new generation,” and Snoop had long wanted to cover and release “Riders.” Certain record company executives now believe that many listeners are no longer discovering music via radio or even MTV. Instead they are learning about and listening to new artists through new media such as the Internet, satellite radio and now, video games.

Due to the steep decline in sales of CDs in the last several years, video games have also emerged as an important source of revenue for record companies and recording artists. For instance, Robischon reports that when Electronic Arts was creating the 21 song lineup for Madden NFL 2005, one of their most popular games, the labels sent 2,500 songs for consideration. In addition, songwriters and those who compose original music for video games are also benefiting from the coalescence of video games and music.

Now that we know that music is a vital element in many video games, and that video games are a more and more important player in promoting new music and in offsetting the decline of traditional revenues, what are the parameters of the deals?

Licensing Parameters
Music in games is used in various ways. Often, for instance, music plays in the background of many scenes in a game. Another example is that music is used as a control. For example, every time you hear a guitar playing a certain theme, the player is prompted to do something else in the game. This kind of use is of music is generally commissioned on a work for hire basis. That means that the musicians/composers who create this music generally transfer all their rights in the music and the recordings to the producer. The price of this kind of job is often paid based on the amount of music composed and delivered. Generally the price can be $1,500 per minute and up. Respected composers/musicians with a track record for composing for games can make quite a bit more. Note that these work for hire agreements generally apply to both the master and the underlying musical composition.

Some video games employ music in an entirely different way. For instance, the Madden 2005 game will feature prerecorded masters some of which have already had considerable success. This is similar to a movie that uses certain highly recognizable music to conjure up a style or an era. Use of highly successful songs in major motion pictures can fetch six figure fees and up for each the song and the master. Licensing of famous songs and masters in video games may never reach these levels because video games do not have as many “windows” as a movie. For instance a movie can be theatrically released, placed on pay cable, network and home video. However, as games gain in popularity, and in production budgets (some are rumored to cost almost as much to produce as major movies), the price of these licenses may eventually rival the prices for use of popular music in block buster movies. Also similar to licensing prerecorded songs for movies, and unlike composers who are commissioned on a work for hire basis, the rights conveyed under these licenses will generally be limited, and the copyright in the master will generally be reserved by the artist or his record company, and the copyright in the underlying music will remain with the composer and/or his music publisher.

Another way that music is used in video games is that certain video game producers are engaging highly successful artists to create new recordings specifically for their games. A good example is the Need For Speed game discussed above which will contain a new Snoop Dog version of the Door’s “Riders on the Storm.” This song will be a featured part of the video and you can bet it cost more than $1,500 per minute to acquire the rights! You can also safely assume that Electronic Arts did not secure the copyright in the master. The underlying composition is already controlled by the Doors’ publishing company, and no doubt they retained the copyright in the song.

Note that the compulsory license rate of 8.5 cents per song per copy does not apply to the use of musical compositions in a video game because, as with movies, these are audiovisual uses and the compulsory license applies solely to audio-only uses.


Soundtracks

There have been instances where game producers have spun off soundtracks based on music contained in their games. So far these soundtracks have not met with great success. Robischon reported in his article:

“Stand-alone video game soundtracks have not proved particularly successful. The critically acclaimed orchestral soundtrack for Halo by Microsoft sold only 40,000 copies, although the accompaniment to Halo 2 is expected to sell better. And the seven-CD box set for Rockstar Games’ Grand Auto Theft Auto: Vice City, which featured a slew of 1980’s radio hits, sold fewer then 30,000 units.”

On the other hand, video game soundtracks are winning awards. In 2004 the MTV Video Music Awards started giving out an award for the best soundtrack from a video game. Perhaps the award was to acknowledge the taste of many in the MTV audience who love these video games, as much it was to recognize the success of the soundtracks.

The compulsory license and the rate established by Copyright Act would apply to the inclusion and distribution of songs in these audio soundtracks. But the record companies generally demand a higher rate than 8.5 cents for the masters, plus a hefty advance.